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Web End = J Bus Ethics (2015) 128:547574 DOI 10.1007/s10551-014-2122-y
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Web End = How the Market Values Greenwashing? Evidence from China
Xingqiang Du
Received: 8 September 2013 / Accepted: 22 February 2014 / Published online: 8 April 2014 Springer Science+Business Media Dordrecht 2014
Abstract In China, many rms advertise that they follow environmentally friendly practices to cover their true activities, a practice called greenwashing, which can cause the public to doubt the sincerity of greenization messages. In this study, I investigate how the market values green-washing and further examine whether corporate environmental performance can explain different and asymmetric market reactions to environmentally friendly and unfriendly rms. Using a sample from the Chinese stock market, I provide strong evidence to show that green-washing is signicantly negatively associated with cumulative abnormal returns (CAR) around the exposure of greenwashing. In addition, corporate environmental performance is signicantly positively associated with CAR around the exposure of greenwashing. Furthermore, my ndings suggest that corporate environmental performance has two distinct effects on CAR around the exposure of greenwashing: the competitive effect for environmentally friendly rms and the contagious effect for potential environmental wrongdoers, respectively. The results are robust to various sensitivity tests.
Keywords Greenwashing Corporate environmental
performance Cumulative abnormal returns (CAR) Media
coverage The Global Reporting Initiative (GRI) The
competitive effect The contagious effect Environmental
wrongdoer China
Introduction
Todays intense business competition compels rms to continuously differentiate themselves from their rivals. As a result, rms use greenization as an important and effective way to achieve differentiation and to answer environmental concerns. In addition, rms are also increasingly recognizing that they carry out environmental responsibilities because consumers and other stakeholders care about corporate environmental performance. Furthermore, some rms frequently construct advertising messages to include environmentally friendly buzzwords and phrases (Chen and Chang 2013) such as ECO, environmentally friendly, taintless, earth-friendly, sustainability, uncontaminated, green, and greenization.
From 2006 to 2009, green advertising in developed countries grew about 300 % (TerraChoice Environmental Marketing 2009). By 2015, sales revenues related to green products and services are expected to reach $845 billion (Tolliver-Nigro...